Term insurance policies act as an income replacement tool for the beneficiaries who are financially dependent on the policyholder, while provides a host of other benefits to the insured individual. However, getting a life cover is not the only thing that is uncertain in one’s life.
Therefore, it also makes sense to factor in various other uncertainties and risks in life that might drive the policyholder to need a cover, for example, the ideal duration that one should consider for a term insurance policy. Many people are still new to the insurance world, and they often end up searching what term insurance is all about, and get confused with the number of options available.
Most insurance companies have started breaking down their premium numbers, making it more affordable to buy the best term plan in India. It is very important that you have a rational approach towards the whole process and do your due diligence when it comes to knowing what your family needs and deciding on the duration of your term insurance policy.
For How Long Should I Buy Term Insurance?
When we are younger, there are many financial responsibilities on our shoulders, and there is a higher possibility of loved ones being dependant on you. However, once you reach the retirement age, an important factor to consider here would be that not many would still be financially dependent on you anymore.
You would have a retirement or pension plan by then and enough savings over the years to financially protect your family without needing insurance coverage. The best term plan in India will easily cover your family, in your absence and offer them a hassle-free claim process as well.
The rate of inflation is a very important factor when it comes to planning finances and making provisions for the future. This is because your expenses in today’s date and time will be different from the expenses towards a similar goal five to ten years from now.
Understanding the impact inflation rate can have on your earnings, savings, and expenses will help you plan better and save for your family’s financial security with higher accuracy. Besides the obvious expenses, it is also important that you have emergency money stashed aside for any unforeseen circumstances that you or your family members might face in the short or long term.
Why And How To Extend Term Insurance Policy?
One of the most known term insurance benefits any insurance providers also allow you to extend your term insurance policy at a later stage even after you have bought it and decided on your sum assured amount.
With the add on riders, some insurers offer policyholders a chance to enhance their life cover, covering bases such as critical illness, accidents. In addition, such plans also support the many milestones of life like getting married, having kids, retiring from their job, etc., with new age features such the guaranteed insurability rider – which ensures your insurability to extend your cover at different stages of life without needing another medical examination.
Besides, if you have invested in the best term plan in India, at a young age, then chances are that your policy may expire right before you get into your retirement years, and that is when you need this the most.
Therefore, extending your term insurance policy to ensure it suffices through your later years would be a wise thing to do as getting a term cover at that age is highly improbable, and if it happens then, the premiums are all too high.
How Can Your Term Insurance Duration Impact Your Tax Planning?
Another major benefit that can be considered while you are determining the term insurance period is the benefit of saving tax on your yearly income. Provided your yearly premium does not cross 10% of the sum assured mentioned in your policy, you can claim it as a tax deduction under section 80C of the Income Tax Act. You can save up to Rs. 1,50,000 under this section, which is a huge benefit, especially for people who fall under higher tax brackets.
You can avail of this benefit for as long as your policy is active, and this will be a very important benefit if you classify as a high taxpayer. Not only is term insurance a great way to secure your family’s financial wellbeing, but it also allows you to avail tax benefits on the premiums you pay towards the policy, and you can simply calculate your taxes using an income tax calculator to know exactly how much benefit you can avail with your premiums.
A term insurance plan, at its core, is a financial security cover that you buy to protect your family and help them survive financially, even in your absence. Make sure that you have considered all the above factors before deciding on the best term plan in India!